Texmo Pipes And Products Limited Vs DCIT (ITAT Indore)
Summary: The Indore ITAT considered seven appeals filed by Texmo Pipes And Products Limited and one Revenue appeal arising from a search conducted on 23 September 2015. The company, engaged in manufacturing and trading HDPE, PP and PVC pipes, faced assessments involving undisclosed income, seized documents, stock discrepancies, disallowances and expenditure claims. The principal Revenue dispute concerned an addition of ₹13.24 crore for AY 2016–17, representing the difference between a search-time surrender of ₹17.74 crore and additional income of ₹4.50 crore disclosed in the return. The Tribunal held that a statement recorded under Section 132(4) is relevant evidence but cannot, on the facts presented, justify an addition merely because a subsequently explained surrender was reduced.
The Tribunal upheld deletion of the ₹13.24 crore addition after examining its components. The ₹3.30 crore attributed to LPS-1 duplicated entries appearing in LPS-6; the further ₹4.43 crore arose from counting both receipts and payments rather than the reconciled amount of ₹3.50 crore already disclosed. Cash of ₹6 lakh found during search was covered by a recorded cash balance of ₹22,39,602. The disputed excess-stock surrender of ₹5.10 crore was not supported by the stock comparison, which showed a difference of only ₹13,36,205 against inventory exceeding ₹54 crore. A further ₹35 lakh represented an unsupported difference in an ad hoc miscellaneous surrender. The Tribunal found no sufficient corroborative material to sustain these additions.
The Tribunal also upheld deletion of the Section 14A disallowance of approximately ₹2.42 crore for AY 2016–17 because the company had earned no exempt income. Following the Madhya Pradesh High Court decision in PCIT v. Keti Construction Ltd., it treated the Finance Act, 2022 amendment as prospective for the assessment year in question. On the assessee’s jurisdictional objection under Section 153A, however, the Tribunal ruled against the company. Applying PCIT v. Abhisar Buildwell (P.) Ltd., it held that incriminating material discovered during the search permitted assessment of total income in the relevant completed assessment years.
The assessee’s appeals raised several further issues, including salary payments to an employee, depreciation on trucks, preliminary expenses under Section 35D, expenditure allegedly incurred on conversion of Global Depository Receipts (GDRs), interest on delayed TDS payments, accommodation-entry commission and entries in seized diaries. The Tribunal gave issue-specific relief rather than accepting or rejecting all claims together. It restored the Section 35D deduction calculations for fresh examination and remanded the alleged ₹25 lakh GDR conversion expenditure for limited verification, while allowing the assessee’s ground concerning ₹26,301 of interest on delayed TDS payment. Its findings on other additions depended on the underlying records, corroboration and the explanations furnished.
For AY 2015–16, the Tribunal separately examined an addition of ₹45,76,789 relating to the proposed acquisition of an interest in Mangal Murti Minerals. The original term sheet recorded consideration of ₹91,56,789, whereas the assessee relied on a subsequent supplementary agreement reducing the amount to ₹45.80 lakh. Since the supplementary agreement was not found during the search and the evidence required further scrutiny, the Tribunal restored the issue to the Assessing Officer. In the combined result, the Revenue’s appeal was dismissed, while the assessee’s appeals were partly allowed or allowed for statistical purposes, depending on the individual grounds. The decision illustrates the importance of reconciling seized material and testing search disclosures against documentary evidence, while recognising that inadequately substantiated claims may still require further verification.
Cases Discussed
- PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 454 ITR 212 (SC) in which
- PCIT(Central), Bhopal vs. M/s. Keti Construction Ltd. 2024 (5) TMI 168 (MPHC),
- Wiiliamson Financial Services Limited versus CIT, Guwahati 2024 (9) TMI 1571
